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Economy

LIC trims stake in Infosys to 3.25%; garners ₹850 cr

LIC, the biggest institutional investor in the stock market, the State-run insurer Life Insurance Corporation of India (LIC) has reduced its stake in Infosys, the country’s second largest software services exporter, to 3.25% in the last quarter. The share sale estimated at over ₹850 crore.

LIC sold shares at a time (during the January-March quarter) when FIIs increased their share in Infosys from 40.65% to 42.10%.  Nevertheless, domestic institutional investors reduced their exposure in Infosys from 15.35% to 13.66%.

Fitch affirms India’s BBB- ratings; outlook stable

Ratings agency Fitch affirmed following Ratings/ Outlook for India:

  • India’s Long-Term Foreign and Local Currency Issuer Default Ratings (IDRs): “BBB-”
  • India’s senior unsecured foreign and local currency bonds: “BBB-”
  • Outlooks on the Long-Term IDRs: “Stable”
  • India’s Ceiling: “BBB-”
  • Short-Term Foreign Currency IDR: “F3″

Key Rating Drivers for India:

  • Relatively high real GDP growth (5-year avg is 6.7% compared to median of 3.2% for other ’BBB’ rated peers)
  • Lost much of its dynamism
  • Fitch forecasts real GDP growth to rise from 4.7% in FY14 to 5.5% in FY15 and 6.0% in FY16
  • Due to the on-going parliamentary elections, course of the Indian economy is timid
  • General Government budget deficit of the Centre and the States combined (7.3% of GDP) much higher than median for other ’BBB’ category peers
  • India’s standards of governance and business environment are comparatively weak and tighten its investment potential
  • Inflation is high at a 5-year avg of 10.2% compared with median of 4.2% for other ’BBB’ peers
  • External position is strong, owing to high level of Forex of USD 304 billion (6.1 months of current account receipts cover compared to median of 4.8 months for other ‘BBB’ rated peers) and low net external debt of (4.4% of GDP compared to median of 9.2% for other ‘BBB’ rated peers). This renders a thick cushion in case of regenerated pressures on the rupee and other asset markets
  • Indian economy is less developed than investment grade peers in many terms
  • India’s avg per capita income (2013 figures) remains low at USD 1,543 compared with median of USD10,778 for other ’BBB’ rated peers
  • UN HDI (Human Development Index) relatively low compared with other ’BBB’ rated peers
  • Owing to rising NPAs (4.2% of total assets in September 2013), the Profitability and capital position of the banking sector will likely continue under pressure, particularly for PSBS (Public Sector Banks)

Cadbury renamed as “Mondelez India Foods Limited.”

The multinational confectionery company, Cadbury India Ltd, a subsidiary of Mondelez International Inc, has changed its name to Mondelez India Foods Limited. This is in line with the gradual changeover of the name of all subsidiaries of the Nasdaq-listed $35-billion firm globally.

The company’s popular products include Cadbury Dairy Milk, 5 Star, Gems, Bournville, Perk, Celebrations, Choclairs, Halls, Bournvita, Tang, Oreo, etc. While the Cadbury branding will be retained on the products owing to the strong brand equity and recall it enjoys with customers, the only change consumers will experience is that the new name “Mondelez India Foods Limited” of the company will appear on the back of packaging of products.

Air India seeks bridge loan of $500 million

Air India is in quest of a ‘Bridge Loan’ of up to $500 Mn to take delivery of 4 Boeing 787 Dreamliner aircrafts between May and November 2014 from an on-going order. For this, Air India has invited offers from banks to arrange the bridge financing for a period of 6-12 months. Air India is offering the aircraft as security and will pay back the loan following its conclusion of a sale and lease-back arrangement.

What is a “Bridge Loan”?

Bridge Loan (also called Bridge Finance, Bridging Loan, or Gap Financing) is a short-term (usually less than a year) loan taken to cover the period between the expiry of one loan and the beginning of another loan. Bridge loan is arranged mostly to accomplished a purchase (viz. a new house, aircrafts) before the borrower gets payment from a sale (of the old house, old aircraft), or before a long-term loan is made accessible upon completion of its requirements.

Bridge loans are normally more costly than normal financing, to pay off for the extra risk. The lender also may demand cross-collateralization and a lower loan-to-value ratio. On the other hand Bridge Loans are generally arranged rapidly with comparatively little documentation.